Naked With Cash: Jake and Allie, March 2014

Naked With Cash is an ongoing series at Consumerism Commentary in which readers share their households’ finances with other readers. These participants benefit from the accountability that comes from tracking their finances publicly and the feedback of the four expert Certified Financial Planners (CFPs).

This year, we have four participants who will share their financial reports, exposing the results of their financial choices. Each participant is paired with one of our Certified Financial Planners. The experts will provide insight and guidance that will help our participants take their finances to the next level by the end of 2014. Learn about this year’s participants and experts.

Jake and Allie have no plans for children, but they have pets that they care for devotedly. Combined, they make $140,000 a year and hope to retire early, when Allie is 50. Both want to start side hustles that they can pursue during early retirement. Allie wants a photography business while Jake thinks running a kennel would be ideal. They enjoy travel and make it a priority to take trips throughout the year. (Read their update from last month.)

After reading Jake and Allie’s comments, you can see a Google Hangout they participated in with Neal Frankle. Neal Frankle appears courtesy of Wealth Pilgrim and MCMHA.org. This month’s Naked With Cash focus is on short-term savings.

Jake and Allie’s Net Worth Statement

Jake and Allie’s Income Statement

Comments and analysis from Jake and Allie

Our finances for March are a little closer to a typical month for us, unlike the last couple months. There’s not too much to report. Standouts for this month: our grocery bill was a little higher with a trip to Sam’s Club on the last day of the month (we go every couple months and stock up on some things); Allie’s photography expenses this month include a pre-pay for a seminar she will be attending and a multi-day, online wedding photography class that she purchased; and our propane bill was a little higher due to the colder weather. Everything else is pretty normal for this time of the year. The federal taxes refund came in and the state will be in during April.

Allie was excited about this month’s topic, so she will be writing this month’s summary from her perspective.

Aside from my doggies, photography, and travel itself, one of my favorite things is travel planning. I’ve learned that many people think traveling is a lot more expensive than it has to be. Coworkers make jokes about taking their “same old vacation” every year, then I hear how much they pay just for lodging, and I realize that I could plan two vacations and possibly a mini weekend trip for the same cost. We don’t actually save for vacation, but I plan and research to ensure that we get the best deal and the most enjoyment out of our time. Sounds simple, right? It is, but it can take a little time.

My Travel Planning Rules (I just made that up) :)

Rule #1: Closer isn’t cheaper. Just because it’s close to home and does not involve a rental car or a plane ticket does not mean it’s cheaper!

Rule #2: Be flexible. Instead of focusing on just one vacation option, we come up with two or three options, then I research to find out what will work best for our timeframe. I look at airline discounts, hotel rates, events happening at that time, any special deals with Expedia, Travelocity, and half a dozen other travel web sites. A few times we’ve had a spot in mind, but switched to another option because it saves us some money.

Rule #3: Be creative. This past year we took a trip to a new city. We booked our flights with airline miles, but I was having a hard time finding a hotel at a decent rate. Our vacation week was within a week of several conferences and festivals, so the hotels were taking full advantage by raising the rates.

Want to take a guess at what I did to find an awesome hotel rate? It wasn’t Priceline. Not knowing much about the city, I picked a couple areas that would be destination points for attractions and located them on Google Maps and searched for hotels nearby. I input our travel dates and found rates along with reviews and hotel info. That idea saved us at a minimum $200 per night on a hotel room in our destination city. We ended up in a little-known gem of an historic hotel (that had also recently been renovated); it was an awesome room at a great deal and in a wonderful location in the city. Needless to say, Google Maps is now on my list for more than just road trip planning.

Rule #4: Look for discount attraction tickets. You can find discount attraction tickets and city passes that include multiple activities, reducing your overall cost. They provide lots of activities and you can save hundreds of dollars at the same time.

Rule #5: Scope out restaurants before you travel. We don’t always stick to the list, but it’s good to have ideas and price ranges to refer to.

Rule #6: Always have a plan. Having a plan (even if it’s just general ideas) helps estimate our trip spending ahead of time so that we don’t overspend.

Onto short term saving…

MONEY SAVED IS NO LONGER MONEY SAVED IF YOU SPEND IT. That’s not very poetic, but it’s true. I remind myself of that when I want to take money out of my account to buy something. I grew up in a one-income family that didn’t have a lot of money. Anything I was given was something I appreciated and took care of because it was a luxury to get it. Don’t get me wrong; we weren’t broke, but my Mom died when I was 12 and my Dad was one that saved his money and wanted to pay his house off as early as he could, so ours was pretty much a no-frills lifestyle.

What was the point of that? As someone that grew up with very little and worked to put herself through college, I don’t always want to part with my money (probably another reason I’ve been reluctant until now to invest a portion of it), so I tend to go another route for things I want to purchase. If I want something, I don’t pull money out of my savings account to go buy it. Three years ago I decided to get a special breed of dog that I had wanted for years. Instead of pulling money out of my savings account, I did a side job of building a web site for someone. The money earned from that job paid for my doggie.

Right now, I have my eye on an extra camera for my photography. The camera I have is great, but I’m starting to get into wedding photography and my old backup camera really doesn’t cut it as a second camera (something that’s a must for shooting weddings). Instead of pulling all of the money out of my savings, I’m keeping track of money from my photography jobs to purchase a second camera. When I save about half of it, I’m going to get my camera. After that, I can book some extra jobs and put the money back in my account pretty quickly.

While that might sound way too simple, and even a little silly, that mindset keeps me from spending money that I might otherwise just pull out of my account because it’s there.

If you’ve kept track of our story so far, you know that Jake and I want to retire a little earlier than the norm. That, along with watching my father work hard most of his life so that he could retire, then watching him have a stroke and become disabled before he had the chance, is another motivator.

While I save my money and don’t buy everything I want, my dad’s experience (and my mom dying so young) also taught me that while it’s important to save for your future, you have to enjoy your present along the way. With that in mind, I’ve tried to establish a good balance. I save my money, but I still do things I enjoy, within reason. When I do those things though, I look for discounts or ways to save money.

Hangout with Neal Frankle, CFP

Neal continues a look at insurance with Jake and Allie by focusing on life insurance. It’s an interesting topic, since the two don’t have children. However, exploring their life insurance needs is still important, since they do have pets that depend on them.

Feedback from Luke Landes

Allie, thanks for sharing your rules for travel planning — especially the tip about Google Maps. I often use Google Maps to pinpoint hotel possibilities, but it seems like you’ve found a way to do more than just find locations.

I like that you’re working on your photography. I do some photography as well, but not wedding photography. I’m more involved with portraits and occasionally still life and landscapes. I was surprised when a potential buyer emailed me after seeing my photography website — she wanted to buy a print of one of the photographs I featured on the website. So I made my first “art photograph” sale, printing and framing the photograph. Good luck with your photography!

I’m glad you also recognize the importance of enjoying your time today. It is a luxury you can afford, so you might as well make the most of it.

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I really appreciate the participants sharing all of this. I only keep track of my spending right now but I’m going to start keeping track of my net worth right away. The net worth gives you a better understanding of where you stand. I’m going to start keeping track and I’m going to set a goal of where I want my net worth to be in 5 years.

Knowing our net worth is important but we need to understand that net worth is not the same as self worth (I read that somewhere).

But the main point of my comment is to thank all the participants for being so honest and open about their finances.

Honestly if someone had asked us where we would have been financially 5-7 years ago I’m not sure what we would have thought. I believe it isn’t where we are now. It seems once you start to save and plan it seems to grow faster.

Through the first 3 months we definitely learned a lot about how much we were spending that we weren’t really aware of.

I used to keep detailed records like this a long time ago when i was trying to get out from a bunch of credit card debt. It helped a lot.

I actually use the same type of spread sheet (have for the last 20 years). Of course, watching your net worth slowly increase i always very satisfying.

Unfortunately, in recent years, protecting our principal has become a priority, so I was only invested in about 35% equities. I probably should have been at about 50%-60%, although I did sleep well at night!

How can you peg 4% of $600k in income? $194k is in a house, and $273k is in cash/cd’s earning far less? If they don’t have the risk tolerance to invest the $273k into equities, then why the assumption that would go into 4% if jake died? by all accounts, jake is more of the risk taker (gambling and common stocks). However, I think the basic premise on selling them on considering life insurance was a good discussion to have. I think Neal missed one point on if you lock in earlier when you are younger and healthier it will cost cheaper than trying to renew later. Need for life insurance does diminish over time, but depends on changing circumstances in the future. Presumably allie or jake could get married after spouse died, and locking in a longer term when you are younger and healthier might be worth the extra monthly expense now. If you don’t need it, you can always stop paying the premium and terminate.

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